Home / News / India /  Centre plans to co-opt states in tightening screws on Chinese equipment imports

NEW DELHI: Discouraging states from using Chinese equipment and technology in the power sector is a key agenda point for Friday’ states power and renewable energy ministers conference, said two people aware of the development.

With power being on the concurrent list of the Constitution, the Centre wants states to be a part of its playbook in initiating tariff and non-tariff barriers, as part of a broad economic response to Chinese aggression in Ladakh.

The conference will also take up draft Electricity (Amendment) Bill, 2020, the 90,000 crore liquidity infusion in stressed power distribution companies (discoms), and the 3.5 trillion proposed distribution reform scheme, tentatively named Samarth, due to end on 31 March, 2026, for discussions.

An Indian power ministry spokesperson confirmed the development.

India’s economic strategy against China includes subsidising finance for promoting local power equipment usage and prior-permission requirements for imports from countries with which it has a conflict. The other measures in the works include support to startups, phased manufacturing programme, vendor development, research and development and levying of taxes.

“Import of power sector equipments from a country posing threat to national security is cause of concern as vulnerabilities in the power system and network mainly arise out of use of equipments designed, developed, manufactured and supplied with intent to commit malicious act in the form of cyber-attacks through embedded malware/ Trojans or other cyber threats," the government documents said.

The move, part of the Atma Nirbhar Bharat plan, is aimed at enabling manufacturing all power sector equipment in India over the next three years.

The government has already imposed basic customs duty on imported solar cells, modules and inverters, effective 1 August, to be followed by a plan to impose import duty on wafers and ingots that go into the manufacturing of solar cells and modules.

It also plans restrict financing from state owned public sector lenders—-Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Indian Renewable Energy Development Agency (IREDA)—to those states who don’t use equipment and technology manufactured in India, Mint reported on 28 June. These three companies are the largest lenders to the Indian power sector.

The union government wants to impress upon the state governments to procure all power sector equipments and materials from within India that has sufficient domestic capacity and testing of imported equipment in certified and accredited laboratories designated by the union power ministry.

The power ministry also plans to enforce a list of approved manufacturers for government supported schemes in the clean energy sector, including projects from where electricity distribution companies procure electricity for supply to their consumers and wants states to follow suit. A similar approved list of modules and manufacturers (ALMM) is also in the works for the conventional power sector as well.

Apart from securing large orders in India’s clean energy space, large thermal power generation project contracts totalling round 48 giga watt (GW) have been placed with Chinese manufacturers. Also, firms use supervisory control and data acquisition (Scada) systems from China in electricity distribution space. The country has an installed power generation capacity of 370 GW.

“There are four broad agenda items for the state power minister’ video conference," said a government official cited above requesting anonymity.

This meeting comes in the backdrop of the discoms being the weakest link in the electricity value chain.

Announced as part of the Rs20 trillion stimulus package, the reform linked discom loans are to disbursed in two tranches of Rs45,000 crore each, for which discoms have evinced interest in availing loans of Rs93,000 crore. Of the first tranche, 2,500 crore has been sanctioned, with the total sanction expected to be in the range of Rs11,500 crore by end June.

The meeting also comes in the backdrop of the draft Electricity Act (Amendment) Bill, 2020, becoming another flash point in the centre-state relationship, with a growing chorus of states including Telangana, Jharkhand, West Bengal and Tamil Nadu opposing some measures.

The measures mooted in the draft bill are intended to help improve the financial health of the power sector and implement the direct benefit transfer (DBT) scheme for better targeting of subsidies, promoting retail competition, payment security mechanism and introducing financial discipline. The proposed amendments have also pitched for a cost reflective tariff and setting up an Electricity Contract Enforcement Authority to enforce power purchase agreements (PPAs).

The draft also proposes to do away with multiple selection committee for central and state electricity regulators and one such standing committee for selecting chairpersons and members of Central Electricity Regulatory Commission and State Electricity Regulatory Commissions (SERCs).

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